Posted: July 12th, 2016

# Use direct labor hours as the cost driver to compute the allocation rate. Determine the amount of budgeted overhead cost for each department?

___ O. Fuel costs for an airline

Required:
Classify each cost as variable (V) or fixed (F) with respect to volume or level of activity.

Probleme #3
Farmington Corporation manufactures toaster ovens, generally selling from 20,000 to 30,000 units
per year. The following cost data apply to the activity levels shown:
Required
1. Complete the preceding table by filling the missing amounts for 25,000 and 30,000 units.

2. Assume that Farmington actually makes 28,000 units. What would be the total costs and the cost per unit at this level of activity?

See attached for table

Problem #4
Banning Company expects to incur \$450,000 in manufacturing overhead costs during 2012. Other budget information follows:

See attached

Required:
1) Use direct labor hours as the cost driver to compute the allocation rate. Determine the amount of budgeted overhead cost for each department.
2) Use machine hours as the cost driver to compute the allocation. Determine the amount of budgeted overhead cost for each department.

Problem #5
Perez Company makes wooden tables, chairs, and lamp bases. Its expected overhead costs for the
next fiscal year are:

Factory manager’s salary: \$180,000
Factory utilities: \$100,000
Depreciation on equipment: \$70,000
Miscellaneous factory costs: \$50,000
Total: \$400,000

Perez uses direct labor hours as the cost driver to allocate overhead costs. Budgeted direct labor hours for the three products are: tables, 8,000; chairs, 10,000; lamp bases, 2,000.

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